Credit ratings agency Moody’s on Friday raised its forecast for India’s real GDP growth to 7% for the current fiscal year, up from its earlier estimate of 6%, citing the economy’s resilience amid the ongoing
West Asia conflict.
“Although we continue to expect India to grow faster than all other G-20 economies, as well as similarly rated emerging market sovereigns, risks remain,” the credit ratings agency said.
Moody’s flagged elevated energy prices and potential food price pressures linked to El Niño as key risks to inflation, consumption and economic growth.
The agency said India’s fiscal policy response to the shock from the Middle East conflict had so far been muted. However, it warned that a sustained rise in global energy prices could push up subsidy spending and increase pressure on the government to provide additional support.
At the same time, higher defence and infrastructure spending could limit the pace of fiscal consolidation, Moody’s said.
India’s economy expanded 7.8% in the April-June quarter, according to government data released last month. Growth comfortably exceeded market expectations, helped by a strong pick-up in investment and manufacturing activity, which offset weakness in mining and consumer-facing services.
(With inputs from Reuters)
